Chapter 3 International Liquidity: The Issues
- International Monetary Fund
- Published Date:
- September 1964
SINCE the last Annual Meeting of the Board of Governors, in Washington in September 1963, the subject of international liquidity has taken a prominent place in the Fund’s work. At that Meeting the Managing Director indicated that the Fund would intensify its studies of international liquidity and related questions, and many Governors expressed keen interest in the subject and in the proposed studies. At the same time, the Ministers and Governors of the ten members that have joined in the General Arrangements to Borrow1 established a study group to make “a thorough examination of the outlook for the functioning of the international monetary system and of its probable future needs for liquidity.” 2 This study has been undertaken by a group of Deputies of the Ten, which has reported its findings to the Ministers and Governors.
The Fund is an important source of international liquidity for its members, and it has frequently contributed to the public discussion of problems of international liquidity. In 1953, the Fund published in its Staff Papers an article entitled “The Adequacy of Monetary Reserves,” written in response to a request by the Economic and Social Council of the United Nations. In 1958, the Fund published a comprehensive staff study, International Reserves and Liquidity, undertaken at the request of several member governments. It was concluded in this study that the resources of the Fund were at that time unlikely to be adequate to meet the calls which might under various contingencies be made on them. This study had great weight in the subsequent discussion of Fund quotas, which led to the general quota increase in 1959. The Annual Report for 1963 devoted a chapter to the topic of international reserves and liquidity; it concluded that “the quantitative and qualitative adequacy of the international liquidity structure requires continued close attention” (page 52). Since the Annual Meeting the Fund has prepared a number of technical studies on the subject of international liquidity, some of which have been or are to be published in Staff Papers.
In its study of international liquidity the Fund has given due weight to the views and interests of countries at different stages of economic development and with dissimilar economic and financial institutions. At the same time, the provision of international liquidity depends to a very great extent on the policies adopted by the major industrial countries. The Fund has, therefore, found it particularly helpful to keep in close contact with current thinking on these issues among the representatives of these member countries. This cooperation was furthered by the participation of the Fund’s Managing Director in meetings of Ministers of the Ten and of staff members at meetings of the Deputies.
Nature and Components of International Liquidity
International liquidity consists of all the resources that are available to the monetary authorities of countries for the purpose of meeting balance of payments deficits. Such liquidity ranges from assets readily available to resources that become available only after extensive negotiation. It may take many forms: reserves of gold and foreign exchange; other assets that can be mobilized in case of need; facilities to draw on the International Monetary Fund or to borrow from other international institutions; various arrangements with foreign central banks or governments to borrow. It also includes, conceptually, such elements, not readily subject to statistical measurement, as a country’s capacity to borrow in the money markets of other countries and, for a reserve center, the willingness of other countries to accumulate further holdings of its currency.
International liquidity thus covers a wide spectrum of availabilities, and any classification into broad categories is to some extent arbitrary. Two types of classification have come into use in recent years. The first distinguishes between “owned” reserves and borrowing facilities; the second between liquidity that is available automatically or without prior conditions that significantly restrict the user’s right of access, and liquidity that is available only on prescribed or negotiated conditions as to use or as to the policies to be pursued by the country using it.
These two classifications do not quite coincide. For example, in some countries the use of gold reserves is restricted by domestic legislation. On the other hand, borrowing facilities, once granted, may be usable without further question. Again, the drawing facilities in the International Monetary Fund cannot properly be classified as either owned liquidity or borrowing facilities.
Where it is found useful in this Report to separate total liquidity into two main components, the second of the two classifications mentioned above is used. Liquidity of a wholly or virtually unconditional nature would at the present time include holdings of gold and foreign exchange in freely convertible currencies, gold tranche positions 3 in the International Monetary Fund, and, in many instances, bilateral mutual credit or swap arrangements. Most other forms of international liquidity fall in the conditional category, though in some instances the degree of conditionality involved may be slight.
The Relation Between International Liquidity and the Process of Adjustment of International Payments
To some extent the level of international liquidity has a direct effect on private international transactions. Thus, the strengthening of the world’s international liquidity position resulting from the facilities provided by the Fund in recent years, and from the construction of a network of mutual credit arrangements among industrial countries, has discouraged speculative movements on the international exchange markets. However, the principal effects of changes in the level of international liquidity are likely to be those exercised through their repercussions on the policies followed by national governments in relation to balance of payments situations.
Any judgment as to the adequacy of a given level of international liquidity must reflect an estimate and an evaluation of the probable policy effects of expanding or contracting such liquidity.
Increases in international liquidity make it easier for the countries initially benefiting therefrom to pursue more liberal policies respecting trade and capital movements and to follow more expansionary—or less contractionary—financial policies than they might otherwise have done. These influences will be spread through the channels of trade. Even though some of the countries whose exports are stimulated may seek partially to offset the domestic impact of the enhanced foreign demand by measures of domestic policy, an increase in international liquidity may be expected to exercise an upward pressure on the general level of demand, employment, and possibly prices. It will also tend to provide greater maneuvering room to deficit countries, and may therefore in some cases tend to prolong balance of payments disequilibria. On the other hand, a reduction of international liquidity, or its failure adequately to expand, will tend to have the opposite effects on the world economy, and may intensify the pressure on countries in deficit.
Whether these consequences of expanding international liquidity are to be regarded, on balance, as desirable or undesirable will depend on the initial level of such liquidity and on world conditions generally. If many countries were to find it impossible, for lack of international liquidity, to correct maladjustments in their balances of payments without resort to measures destructive of national or international prosperity, or if the general level of effective demand in the world were such as to hamper growth and employment, an expansion of international liquidity would be desirable. On the other hand, a general condition of overabundant demand in the world economy would be an appropriate signal for caution in measures to expand international liquidity.
In attempting to resolve these issues, much depends on the type of national economic and financial behavior that it is desired to encourage or discourage, bearing in mind the impact not only on individual countries but also on the world at large. To some extent the relevant objectives and principles of behavior are laid down, explicitly or implicitly, in the Articles of Agreement of the International Monetary Fund; and they have acquired additional concreteness from the experience countries have had in the application of different policies during the postwar period, and from the appraisals made of these policies by the Fund and by other international organizations, such as the Organization for Economic Cooperation and Development.
The promotion of high employment and economic growth and the maintenance of price stability are considered by all countries as predominant desiderata of economic policy. These desiderata have to be pursued in an international setting, which implies that countries must keep their international payments in approximate balance over the average of a period of years. In the short run, balance of payments disequilibria are unavoidable, and, in the absence of adequate liquidity, countries may be forced into measures that are destructive in terms of national and international objectives of economic policy. But, over the longer run, countries must adjust their policies in such a manner as to aim at a payments balance and to restore balance when it has been disrupted. It is essential that the provision of international liquidity—the means to finance disequilibria—be seen always in conjunction with the process of payments adjustment—the steps to eliminate disequilibria. These two aspects are clearly combined in the Fund’s purposes—the Fund is to make its resources available to members; it is to do so, however, under adequate safeguards, in order to provide members with an opportunity to correct maladjustments in their balance of payments, without, however, resorting to measures destructive of national or international prosperity.4
Adjustment is not a process whose working can be determined by some automatic response mechanism. Countries will wish to judge the nature, magnitude, and origin of any disequilibrium in their payments in order to decide whether policy responses are indicated and, if so, what combination of instruments of economic policy at their disposal should be applied in the particular circumstances. As the Fund had occasion to observe in a recent report: if
a sound set of policies is being followed … no change in them would be needed to meet payments difficulties that are due solely to temporary situations in foreign markets, or to such factors as a temporary fluctuation in crops. The mere fact of a falling off in exports would not be taken as an indication that a corrective program was necessary or that the corrective program already envisaged should be intensified.5
Balance of payments disequilibria that are of more than transitory character do require corrective policy action. For this purpose it is essential that, in framing its economic policies, each country take account not only of the requirements of its domestic policy objectives but also of the fundamental trends (as distinguished from the transitory fluctuations) in its balance of payments. Countries that are tending to fall into persistent payments deficits should be willing to pursue less expansionary policies than they would otherwise prefer, though they should not be expected to endure situations of high or prolonged unemployment of resources or economic stagnation. Again, countries that are tending to run into persistent surpluses should be willing to pursue, within limits, a more expansionary policy than they would have been inclined to adopt for purely domestic reasons. The wider the range of policies that countries can effectively employ—and countries vary a great deal in this respect—the better they will be able to maintain or quickly restore external balance, while avoiding both unemployment and stagnation or inflationary developments.
It has been well established in the experience of Fund members—developed and less developed—that an important role is to be played by fiscal and monetary policies in restoring balance of payments equilibrium. If such policies create excess demand that spills over into the balance of payments, a change in financial policies will be needed to redress the balance. As fiscal policies become better developed and can more readily be adjusted to changing circumstances, less reliance needs to be placed on monetary policies to influence domestic demand, and this will, in turn, permit more attention to be paid to the effects of monetary policy on the international movement of capital.
One area of adjustment lies in international shifts of relative costs, prices and incomes, with a consequent effect on flows of trade. In modern societies, actual reductions in wage and salary levels are regarded as acceptable only in the most unusual conditions. For this reason, general reductions of costs and prices in deficit countries will usually occur only to the extent that wage increases are kept below increases in productivity, or where other elements of costs or profits are reduced. On the other hand, few countries can completely resist cost and price increases when the underlying pressures for upward adjustment are strong. The result is that international adjustment through changes in relative costs and prices typically involves more upward adjustment in surplus countries than downward adjustment in deficit countries.
In modern industrial countries, governments influence both the economy and the balance of payments by a wide range of internal and external measures. Therefore, in many situations of imbalance, countries (and especially surplus countries) can use a variety of means that both are desirable from a general economic viewpoint and contribute to international adjustment. They may include unilateral tariff reductions by surplus countries experiencing excess demand, cooperation among countries or actions by individual countries to encourage equilibrating movements of long-term and short-term capital, or the provision of special financing (such as advance debt repayments).
Whatever the specific policies adopted, it is clear that unless adequate weight is given to balance of payments considerations in determining these policies, it would be difficult indeed for countries to achieve their domestic goals while maintaining effective par values in the manner provided for in the Articles of Agreement of the Fund, and generally accepted as one of the important foundations of the present international economic system.
Adjustments in exchange rates are of course not precluded by the par value system, and are indeed foreseen by the Articles in the event that a country has fallen into fundamental disequilibrium; but such situations should arise less frequently to the extent that the policies described above are followed. Members are expected to avoid restrictions on payments and transfers for current international transactions to the utmost practicable extent. Restrictions on capital movements may be less objectionable, particularly where they are intended to deal with speculative movements. Because of the difficulties and drawbacks attached to such restrictions, it is, however, preferable to follow, wherever possible, policies aimed at attracting appropriate equilibrating movements of private capital through international coordination of interest rates or similar international action, or to offset undue movements of short-term capital through the use of international liquidity.
A proper use of policies, along the lines described above, should make it possible to correct and reverse balance of payments disequilibria within a reasonably short period, without prolonged unemployment or stagnation in deficit countries or undue inflationary pressures on surplus countries. It is appropriate that the payments gap during this period of adjustment should be bridged by the use of international liquidity.
The adoption of desirable governmental policies, such as we have been discussing, does not depend solely on the level or rate of growth of international liquidity. Direct international agreement on aims of policy and cooperative action toward their achievement are also important. The search for measures to raise the level and improve the stability of the exports of primary producing countries, and the arrangements being concluded to assure a large and steady flow of aid and capital to the developing countries, may in particular be mentioned in this connection. The scope for bringing about desirable adjustments to specific situations through mutual consultation is perhaps greatest among the principal industrial countries. In general, however, control over the supply of international liquidity, especially of conditional liquidity, must be regarded as an important instrument for influencing policies in a desirable direction.
In considering the bearing of the supply of international liquidity on the promotion of adjustment processes, however, it is well to keep two points in mind:
(1) The determination as to whether the available supply of liquidity is adequate or inadequate must always be a matter of judgment, and a collective judgment is particularly difficult to arrive at because the balance of advantage, at any rate in the short run, may be different with respect to, and in the opinion of, different countries. Action in the liquidity field which absorbs unemployment in one country may promote excessive demand in another, and any change in the supply of international liquidity is likely to involve some transfer of resources, at least temporarily, between countries.
(2) International liquidity is heterogeneous in character and the need for it at any time cannot be expressed in a single over-all figure. Whether or not the common objective of economic policy would, on balance, be promoted by a larger world total of liquidity depends on many factors, such as its composition (as between gold, foreign exchange, credit facilities, etc.), the way in which it is distributed among countries, and the manner in which any increase would be brought about.
Adequacy of International Liquidity
On the occasion of the last Annual Meeting of the Board of Governors of the Fund, it appeared to be generally agreed that international liquidity was adequate. The studies which have been in process during the year have not led to any different conclusion. Situations of underemployment are evident in certain parts of the world; situations of excessive demand elsewhere. There has been no slackening of the growth in world production and trade. The imbalance of payments that existed a few years ago among the industrial countries has been notably reduced. As regards primary producing countries, there has recently been a welcome recovery in the terms of trade to something approximating those of 1957. However, the reserves of these countries, taken as a group, tend to remain small because of their urgent need for imports.
The conclusion that the general level of international liquidity is broadly satisfactory at the present time does not mean that its distribution among countries or the supply of each type of liquidity is equally satisfactory. But the distribution of international liquidity among countries at any moment of time inevitably presents inequalities that reflect the reserve movements resulting from past payments disequilibria.
The concern of present-day analysis is to examine the prospective trend in the adequacy of international liquidity. This is not an easy task. Prospective adequacy depends to a very great extent on such unpredictable factors as the presence, at some future time, of inflationary or contractionary tendencies in the world economy, and the distribution by countries of reserves and of payments deficits and surpluses at that time. Notwithstanding these difficulties, the analysis which follows permits the conclusion that it will be necessary to continue and possibly to broaden international action directed toward the creation of international liquidity.
Demand for Liquidity
Attention may first be directed to the likely expansion of international payments. International liquidity is of course not directly used to make payments for international transactions—exporters and importers use the facilities of international banking and finance for this purpose. But a larger world economy with larger world trade is likely also to involve greater absolute payments disequilibria.
It is important that liquidity considerations should not inhibit industrialized countries from pursuing policies designed to liberalize trade and to augment capital flows and development aid. Some of them, also, have yet to achieve full employment within their domestic economies. Developing countries, faced as they are with large import needs relative to their export incomes and reserves, will also have a rising need for liquidity in order to be able to avert undue disturbance to their development programs because of temporary or unexpected balance of payments difficulties.
Over the last ten years the value of international trade rose at an average rate of 5.8 per cent per annum, and the value of international financial transactions probably rose even more. Even after making allowances for some possible reduction in the rate of growth of the world economy, it would be difficult to put at less than 4 per cent per annum the appropriate increase, under noninflationary conditions, in the over-all value of international transactions over the next ten years.
Estimates of the relationship between payments disequilibria and the level of financial transactions have to be based on certain assumptions as to official policies. It is assumed that convertibility of currencies and the maintenance of effective par values will continue to be accepted as the broad objectives of policy by Fund members. This means that there will be no official support for an international financial system based on fluctuating exchange rates or on a return to restrictions as a means of easing any pressure on the available stock of world liquidity.
Certain gradual changes in factors affecting the adjustment process—such as increased liberalization of capital movements and a tendency toward closer policy coordination of monetary policies in the main financial centers—will probably continue. The net impact of these on the need for liquidity in the longer run is, however, difficult to gauge. The tendencies that have been visible in recent years toward an improved cooperation between central banks with respect to monetary policy and interest rates should help to reduce payments disequilibria. A rise in private international capital movements relative to international trade could operate in either direction. On the whole, however, while private capital can be helpful in financing moderate swings in the trade balance, in the case of more serious disturbances confidence may tend to be impaired; in view of this, the increased mobility of capital must be counted potentially as a factor enhancing the payments disequilibria. On balance it seems prudent to assume no decline in the magnitude of payments disequilibria relative to the value of international transactions or of international trade. In Chart 2 an indication is given of how payments disequilibria—as measured by the sum of payments deficits of countries having such deficits—have varied relative to international trade and reserves over the past decade.
Chart 2.All Countries’ Official Reserves, Imports, and Payments Imbalance, 1953–63
1 Including gold tranche positions in International Monetary Fund.
2 Sum of payments deficits of countries having such deficits.
Supply of Liquidity
Over the last ten years the average rate of growth of gold reserves has amounted to 1.6 per cent per annum, that of foreign exchange reserves to 4.3 per cent per annum, and that of gold tranche positions in the Fund to 7.6 per cent per annum. The average annual rate of growth of these three items combined has amounted to 2.8 per cent per annum (Chart 3). Owing in particular to the large increase in Fund quotas which took place in 1959, the conditional drawing facilities in the credit tranches of the Fund expanded over the decade in question by 6.0 per cent per annum. There was also a substantial growth of mutual credit arrangements on a bilateral basis between the United States and various industrial countries in 1962-63, while less formal credit arrangements were devised in favor of the United Kingdom in 1961 and again in 1963. Assuming that such arrangements were capable of being reactivated or restored, one might estimate that the annual rate of growth of international liquidity in all these forms over the decade amounted to some 3.3 per cent.
Chart 3.International Liquidity: Countries’ Gold and Foreign Exchange Reserves and Positions in the International Monetary Fund, 1953–63
1 A member’s total tranche position is the sum of its gold tranche and credit tranche positions in the Fund.
The considerations just summarized point to the conclusion that in the next decade there is likely to be persistent and substantial growth in the demand for international liquidity. At the same time, the factors which have determined the growth in liquidity during the past decade seem likely to provide a smaller annual rate of growth over the decade to come. The net addition to official gold holdings arising from gold production and sales by the Soviet Union, less the nonmonetary uses of gold, may well in the years ahead be larger than in most recent years; even so, however, it could hardly be expected that the annual rate of increase of monetary gold holdings would exceed 2-2½ per cent. The rapid expansion in foreign exchange reserves over the past decade was attributable to the fact that the United States, whose reserves consist almost entirely of gold, was in deficit vis-à-vis countries that were accumulating a considerable proportion of their surpluses in the form of foreign exchange (Chart 4). It must be assumed that payments deficits of the United States will not contribute to the formation of reserves in future on the same scale as in recent years. It therefore seems safe to forecast that in the future greater reliance than over the past decade will have to be placed on the provision of international liquidity, as needed, by other means. The Fund could make an essential contribution in this connection.
Shorter-Term Variations in the Need for and Supply of International Liquidity
Apart from the adequacy of international liquidity in the longer run, the short-run fluctuations in its supply and the need for it deserve consideration. The supply of gold for monetary purposes is dependent on such factors as changes in the conditions governing gold mining, as well as on the confidence factors that influence private gold hoarding. Exchange reserves increase when countries which hold comparatively little foreign exchange in their reserves—including notably the reserve currency countries themselves—are in payments deficit, and decrease when they are in surplus, vis-à-vis countries which hold a substantial proportion of foreign exchange in their reserves. On the basis of considerations such as these, it has been argued that the supply of international liquidity is too dependent on factors having no relation to the need for liquidity, and is not sufficiently responsive to variations in the need for liquidity. In the same vein, it has also been observed that holdings of foreign exchange can vary in the light of the degree of confidence in the key currencies themselves—the desire of countries to hold a larger or smaller proportion of their reserves in the form of currency rather than gold. Some of these factors, notably the confidence factors mentioned above, may work perversely, expanding international liquidity when on general economic grounds it ought to be contracted, and vice versa.
These considerations deserve to be kept in mind; but they do not provide a complete view of the cohesion and the responsiveness to need that have been shown by the system in the postwar period. The first point to be noted in this connection is the great strength of the reserve currencies over the long pull. Owing to this, to the realization by the monetary authorities of many countries of their overwhelming common interest in the maintenance of international monetary order, and to the spirit of cooperation that has prevailed among them, such disturbances to confidence as have occurred after the early postwar crisis affecting sterling have been quite rapidly overcome. It is noteworthy that when a temporary loss of confidence has been evident on the part of some private holders of funds, official holders of dollars or sterling, as the case may be, have not generally changed the composition of their reserves in such a way as to reinforce the movements in private funds, but on the contrary have acted so as to offset these movements and to support the currency under pressure.
When speculative movements of funds have become troublesome, new forms of liquidity have been developed to offset them or to discourage their continuance. Such, for example, were the Basle arrangements which came to the assistance of sterling in 1961 and 1963, the mutual credit (swap) arrangements negotiated by the United States in 1962-63, the gold pooling arrangements put in operation beginning late in 1961, and the development of techniques of medium-term borrowing denominated in the currency of the lending country. The Fund’s General Arrangements to Borrow were similarly a demonstration of the willingness to strengthen liquidity arrangements in the light of changing needs. Accelerated repayments of long-term indebtedness previously contracted have also played a useful part in financing deficits and in limiting the transfer of reserves.
There are further elements in the existing system for the provision of international liquidity which show a responsiveness to variations in need. For example, insofar as payments disequilibria are financed through the Fund, the expansion in Fund drawings not merely enables the country in deficit to maintain its reserves; it also expands the over-all level of reserves by increasing the amount of gold tranche positions in the hands of surplus countries. Again, a country, though not currently in payments deficit, can, if it desires to do so, expand its stock of international liquidity without impairing the liquidity position of other countries if it is willing to expand its reserves in the form of currency holdings.
Since the end of the war, the international financial system—based on reserves in the form of gold and reserve currencies supported by the International Monetary Fund as well as by certain other credit arrangements—has permitted a signal expansion of the world economy and of international trade. It has made it possible to restore the convertibility of the main currencies and to cope with a number of difficult situations which affected certain currencies. These results have been obtained while a relatively high level of employment was maintained in the world. At the same time, there is no ground for complacency: for example, only modest progress has been made in raising the incomes of the developing countries, and inflationary tendencies are still evident over a wide area.
The accumulation of dollars has constituted an important contribution to the over-all supply of international liquidity since the war, following the accumulation of sterling balances in the preceding years; but, as stated before, the expansion in reserve currency holdings cannot be expected to continue at the rapid rate of recent years. In these circumstances, it would seem both desirable and timely to enter upon a broad exploration of the possible ways to meet any inadequacies in the supply of international liquidity to which the present system might otherwise give rise and to offset any undesirable fluctuations in it.
It has been noted that the financial system has shown great ability to adapt itself to changing requirements. Important improvements have been made in it. When considering any further changes that may be appropriate one should keep in mind the substantial benefits that the system has brought and the perils which it has helped to avoid. It will be wise, therefore, to supplement and improve the system where changes are indicated, rather than to look for a replacement of the system by a totally different one.
Some of the improvements in the system that have already occurred have taken the form of expanding multilateral sources of liquidity; others have been of a bilateral or a regional character. In looking ahead toward the further change that may be necessary, it is important that certain of the characteristic advantages of the multilateral institutional approach to the creation and administration of international liquidity should not be lost to view.
The bilateral credit arrangements between monetary authorities which have been introduced among industrial countries in recent years are useful in several respects, including the speed and secrecy with which they can be invoked to deal with speculation. On the other hand, their bilateral character limits their potential scope. In the first place, it is generally agreed that bilateral arrangements in the form of swaps are essentially of a short-term nature and are not appropriate to meet disequilibria for more than a few months. Secondly, the possibility of undertaking such arrangements is in practice open’ only to a relatively restricted group of countries. By contrast, multilateral institutions can extend the scope of their operations to a world-wide membership.
The advantage of the multilateral institutional approach is still more marked with respect to ensuring that liquidity is made available to countries at appropriate times and on appropriate terms and conditions. If the amount of international liquidity considered desirable from the standpoint of avoiding excessive restriction of trade or economic activity by deficit countries were provided solely in the form of reserves, payments disequilibria might remain too long uncorrected and surplus countries be forced to provide excessive resources to deficit countries in the form of balance of payments financing. Where payments surpluses prove to have a persistent character, the expansionary pressure which the financing of the corresponding deficits involves is not necessarily inappropriate. However, in many cases more action by the deficit countries is required, and in these cases the provision of liquidity in conditional form is of great use in ensuring that appropriate corrective measures are applied. The advantages of an approach through an international organization in these circumstances are manifold. In particular, it provides the forum for a balanced consideration, and hence the best reconciliation, of the various objectives in the international financial field as they affect all countries: adequate growth and high levels of employment, monetary and exchange stability, and the removal of impediments to international trade and payments.
Belgium, Canada, France, Federal Republic of Germany, Italy, Japan, Netherlands, Sweden, United Kingdom, and United States.
Communiqué of the Ministers and Governors of the ten countries, October 2, 1963 (Summary Proceedings, Annual Meeting, 1963, page 286).
A member’s gold tranche position is measured by the extent to which the Fund’s holding of the member’s currency falls short of its quota. Such positions can be drawn upon with great freedom. See page 34.
Article I (v).
Compensatory Financing of Export Fluctuations, (Washington, February 1963), page 11.